Modelling the distribution of day-ahead electricity returns: a comparison

Sandro Sapio ()

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: This paper contributes to characterizing the probability density of the price returns in some European day-ahead electricity markets (NordPool, APX, Powernext) by fitting some flexible and general families of distributions, such as the alpha-stable, Normal Inverse Gaussian (NIG), Exponential Power (EP), and Asymmetric Exponential Power (AEP), and comparing their goodness of fit. The alpha-stable and the NIG systematically outperform the EP and AEP models, but the tail behaviours and the skewness are sensitive to the definition of returns and to the deseasonalization methods. In particular, the logarithmic transform and volatility rescaling tend to dampen the extreme returns.

Keywords: Electricity prices; alpha-stable; Normal Inverse Gaussian; Exponential Power; Asymmetric Exponential Power; goodness-of-fit (search for similar items in EconPapers)
JEL-codes: C16 L94 (search for similar items in EconPapers)
Date: 2009-12-18
New Economics Papers: this item is included in nep-ene
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http://www.lem.sssup.it/WPLem/files/2009-21.pdf (application/pdf)

Related works:
Journal Article: Modeling the distribution of day-ahead electricity returns: a comparison (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2009/21

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